Using a Private Label E-Liquid MFG: Are You Really Covered as an Additional Insured?

This topic comes up quite frequently. There is a misconception that if a manufacturer of a private label e-juice or vape device company lists you or your company as an Additional Insured that you are covered.

Here are some good reason to have your own policy:

The coverage on the manufacturers policy can only be triggered if the liability is the manufacturers. For example, if the manufacturer added the incorrect ingredient which caused the injury then coverage will apply. However, if you instruct the manufacturer to make a product for you and they make it to your specifications and it’s your specifications or requested ingredients which caused the loss, the manufacturers policy will not afford any coverage for your claim.

Additional Insured coverage is often secondary or excess to the customers “your” policy. Once your policy limits are exhausted, the manufacturers policy will offer coverage but only if the liability is actually the manufacturers.

The Additional Insured coverage will only extend to Products/Completed Operations AKA Product Liability. It leaves a major gap for any Personal/Advertising claims which cover marketing and alleged consumer right violations. They include but are not limited to weights and measures, or labeling your product as “Premium”, or lack of product warnings. These types of lawsuits are commonly classed together and are called “Class Action” law suits which are very costly.

As an Additional Insured you are sharing the manufacturers policy limits with all of their customers who are Additional Insured. Consider a scenario in which their equipment is contaminated and is not detected for 3 days. During this time 100,000 bottles are filled for 20 customers. This leads to 20 lawsuits which divides the policy limits by 20. If the manufacturer has a 1MM policy that leaves only $50,000 per claim/per additional insured. However, this does not include any defense or indemnity coverage for the manufacturer themselves.

Failure to pay – a simple accounting/clerical error by the manufacturer may lead to the cancellation of the policy. Leaving you without coverage for all the products which were manufactured for you.

Product Recall: In most cases private E-Liquid manufacturers don’t carry Product Recall Insurance which is not part of General Liability or Product Liability. Product Recall Insurance covers the cost to recall, notify, warehouse, destroy, and restock the products.

As a rule, just maintain your own policy and remember that the manufactures policy only covers their mistakes. Don’t take a chance or rely on someone else to insure your business. Don’t take insurance advice from someone who is not an insurance broker. When you choose a broker be sure to do business with one who is experienced and knowledgeable in the e-cigarette insurance or vape insurance field.

This article was written by Sarkis Kaladzhyan, President of CALCO Commercial Insurance. CALCO is the nations only insurance broker with an exclusive practice for the Vape Industry. The company is an advocate for the Vape Industry and a leader in providing coverage nationwide since 2008. www.ecigaretteinsurance.com